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German private sector growth eases slightly in June: PMI

Thu, Jun 23, 2016 - 4:04 PM

German private-sector growth eased in June as humming factories failed to offset a slowdown in services, but the index remained stable suggesting Europe's biggest economy probably expanded at a solid rate in the second quarter.

PHOTO: BLOOMBERG

[BERLIN] German private-sector growth eased in June as humming factories failed to offset a slowdown in services, but the index remained stable suggesting Europe's biggest economy probably expanded at a solid rate in the second quarter.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, edged down to 54.1 from 54.5 in May.

This was below the Reuters consensus forecast for 54.2, but comfortably above the 50 line that separates growth from contraction, where it's now been for 38 months in a row.

Growth in manufacturing accelerated to 54.4, propelled by the strongest increase in new export orders for more than two years, as demand increased from China and the United States.

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The survey showed that companies appeared to be shaking off any uncertainty over a possible British exit from the European Union. Employers continued to add to their headcounts and the rate of job creation was the most marked so far this year. "It looks like companies are not bothered by Brexit. Producers are enjoying rising demand in other countries and are not worrying about the United Kingdom," said Markit Chief Economist Chris Williamson.

"Barring any disruption from the UK vote, it does look like this solid but unexciting growth will continue," he said, adding that Markit expects the economy to expand by 0.4 per cent in the second quarter.

The findings chime with a poll published by the Ifo economic institute on Wednesday, which found nearly two-thirds of German industrial companies believed a British exit from the European Union would not hurt their business.

However, the DIW economic institute has warned a vote to leave would likely lead to higher export tariffs, reducing German trade and knocking as much as half a percentage point off growth in Europe's biggest economy next year.

Germany's economy grew by 0.7 per cent in the first quarter, buoyed by higher state and household spending. Growth, however, is expected to slow in the second quarter as foreign trade cools, the Finance Ministry and central bank said on Monday.